What is Blockchain?

Blockchain describes a chain of data or transactions as “blocks” linked or “chained” together by cryptographic signatures, each of which is called a “hash”, stored in shared ledgers, and supported by a network of connected processes called “nodes”. Nodes maintain a copy of the entire blockchain and are continually updated and kept in-sync.

While depending on well-known and tested underlying technology, such as networking, hashes, and encryption, blockchain is very different from traditional programming, networks, databases, and web interfaces. A new understanding of design, patterns, data sharing, and implementation is required with blockchain.

Adding or Updating Data

Adding or updating data on a blockchain requires consensus of the network making it nearlyimmutable. Once a block is written to a blockchain, it cannot be altered or deleted. Blockchain transaction records are immutable, because each block of data is linked to the previous block by including the previous block’s unique “hash”, which is mathematically derived from the block’s content. If a bad actor were to change the content of a block, the block’s hash would change, which would then “break” its connection to the subsequent block. This would require the bad actor to then re-hash the next block, and all subsequent blocks in order to cover their tracks. However, since there are multiple copies of the ledger, the bad actor would have to simultaneously change every version of the ledger at each location, which is practically impossible especially as blockchain networks grow large and risk of collusion becomes negligible.

A Decentralized Solution

Blockchain is characterized by being a decentralized, or a distributed solution, rather than a centrally controlled solution. Blockchain is typically a peer-to-peer network, hence there is no single point of failure. Blockchain is available on a variety of platforms and protocols, and brings with it concepts that may introduce nuances or changes to existing healthcare business models.

While blockchain achieves a certain level of “democratization” of data, blockchain does not necessarily open access to data as “democratization” may imply, but it may address existing needs and uncover new business, administrative, and clinical opportunities that were not previously considered.

A Focus on Transactions

Blockchain technology depends on consensus for the validity of transactions, and while transactions can be interpreted widely, not all healthcare activity is transaction-based, and not all healthcare transactions may be appropriate for blockchain solutions. Blockchain brings with it the potential for smart contracts, digital computer code that automates the execution of binding agreements among parties. Blockchain also provides the ability to create value for transactions through “tokens”. This tokenization of the blockchain has been implemented in cryptocurrency settings such as Bitcoin, Litecoin, and Ethereum.

More than Cryptocurrency

Part of the confusion around the differences between cryptocurrency and blockchain originated from terminology that was used during the early evolution of blockchain technology, where it’s most attention-grabbing application, cryptocurrency (such as Bitcoin and Ether), was at the forefront of the press. Often, the terms blockchain and cryptocurrency were used synonymously, leading to some confusion for those trying to understand this new technology and the benefits it could provide.

Blockchain itself is the backbone of all cryptocurrencies and enables their creation and exchange through secure, decentralized, and anonymous transactions. Cryptocurrency is essentially a digital form of money or medium of exchange; an alternative to traditional fiat money, such as the U.S. dollar, Euro, etc.

Cryptocurrency functions as peer-to-peer money without the input of banks (the issuer of fiat money) as an official issuing intermediary. Similar to cash and banking transactions, cryptocurrency needs to maintain a digitized, decentralized, public ledger of all transactions, which is stored in the blockchain.

Simply put, cryptocurrency cannot exist or function without blockchain, but it is far from the only use case that can be applied to this technology. Blockchain is a foundation or platform, which supports running different applications. Cryptocurrencies are one type of application that can run on blockchain, but there are many more potential applications, and several promising healthcare specific blockchain applications or use cases.